Barely sixty days after its establishment, the Troubled Asset Relief Program (TARP) is itself, well, in big trouble. 

Since the Treasury Department has already committed $290 billion of its initial $350 billion authorization, the TARP program is bumping up against its first hard ceiling.  The remainder of the total of $700 billion Congress authorized will only be made available after explicit congressional approval and outgoing Treasury Secretary Henry Paulsen has been noncommittal in public about whether he intends to seek access to the rest of the money. 

However, TARP is facing heightened criticisms of its effectiveness and oversight.  In addition, after Congress rejected a legislative handout for Detroit’s three domestic automakers, the Bush administration announced that it might tap TARP to provide them with a cash infusion, a move which muddied the rationale for TARP even further, and sharpened the general public’s perception of TARP as nothing more than an anything-goes slush fund for politically-connected industries looking for a handout.  With the transition to a new and different presidential administration within weeks, the Bush administration is fast becoming irrelevant, but the effects of the mismanagement of TARP will be with us for a long time. 

The law that established TARP also called for the creation of a Special Inspector General for TARP, or SIGTARP to ensure that taxpayer money would be protected from mismanagement and abuse.  However, the Bush administration only recently announced its nominee to the position, New York Assistant U.S. Attorney Neil Barofsky.  The process has not moved forward from there, presumably partly in order to give the incoming administration an opportunity to ratify that choice or nominate someone else.  Mr. Barofsky, should he be confirmed, will be arriving long after hundreds of billions of dollars have potentially gone down a rabbit hole. 

In December, the Government Accountability Office (GAO) expressed serious concerns about the management and oversight of TARP.  According to GAO, “Treasury has yet to address a number of critical issues, including determining how it will ensure that the Capital Purchase Program is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments.”  In addition, GAO observed that while the Treasury’s Office of Financial Stability is “working to implement a comprehensive system of internal control, until such a system is fully developed and implemented, there is heightened risk that the interests of the government and taxpayers may not be adequately protected and that the program objectives may not be achieved in an efficient and effective manner.” 

On the heels of GAO’s negative assessment of TARP’s oversight came hearings in the House of Representatives, which heard testimony on December 10 from members of its own oversight board, the Congressional Oversight Panel (COP).  The COP report posed fundamental questions about the program, such as “What is Treasury’s strategy?” and “How is Treasury Deciding Which Institutions Receive the Money?”

Taxpayers should be alarmed that those basic questions are just now being asked and that there appears to be virtually no oversight of TARP.  When it comes to government financial transactions, sunlight is the best disinfectant against scandals and mismanagement, which tend to molder and grow unchecked….especially under a TARP.